Contemporary Financial Statement Analysis and Data Analytics

Financial Statement Analysis (FSA)

Examines financial data to interpret past performance and assess current conditions to predict future trends.

Data Analytics (DA)

Analyzing raw data to answer specific questions.

Modern FSA Approach

Combines financial statements (10K, 10Q, annual reports) with external sources (equity reports, industry trends, social media insights).

FSA Framework Step 1

Define Stakeholder of Interest: Stakeholders (vendors, lenders, owners) have unique questions.

FSA Framework Step 2

Master the Past: Analyze historical data to understand 'What happened?' and 'Why did it happen?'

FSA Framework Step 3

Predict the Future: Forecast outcomes and assess actions based on these predictions.

FSA Framework Step 4

Answer Stakeholder Questions: Recommend actions supported by analysis results.

AMPS Model

Ask the Question < Master the data < Perform the analysis < Share the insights.

A(M)PS Model

Master the Data: Identify and organize relevant data.

AMPS Model

Perform the Analysis: Utilize techniques (descriptive, diagnostic, predictive, prescriptive analytics).

AMPS Model

Share the Findings: Communicate outcomes effectively using visualizations and sensitivity analysis.

Descriptive Analytics

Summarize historical data to understand 'What happened?'

Diagnostic Analytics

Analyze reasons behind outcomes, e.g., 'Why did the firm's earnings decline?'

Predictive Analytics

Forecast future events, e.g., 'What will sales growth be next year?'

Prescriptive Analytics

Recommend optimal actions, e.g., 'Should the firm issue more debt?'

Database Repositories

EDGAR (US SEC), SEDAR (Canada), Company-specific examples: Apple Investor Relations.

Key Filings

Annual Reports: Form 10-K (US) / Annual Financial Statements (Canada).

Key Filings

Quarterly Updates: Form 10-Q (US) / Interim Financials + MD&A (Canada).

Competitive Environment Analysis

Utilize Porter's Five Forces framework to evaluate: Threat of new entrants, Bargaining power of buyers/suppliers, Threat of substitutes, Industry rivalry.

Strategic Positioning

Assess a company's approach to achieving a competitive edge.

Data Visualization Techniques

Graphs, plots, bubble charts, sparklines.

Sensitivity Analysis

What-if scenarios, pivot tables, open- and closed-form analysis.

Comparing Companies Example

Company A: Revenue grew 20%, expenses grew 30%. Company B: Revenue grew 10%, expenses reduced by 15%. Conclusion: Analyze which company demonstrates better financial stability using FSA tools.